Yes. Thank you. Good morning, everyone, to our Q2 trading update investor and analyst call of Delivery Hero. We trust you have all received the documents in the e mail this morning and of course, they are also available on our website. For the call, we will have, firstly, introductory remarks by Niklas, our Co Founder and CEO and then Emmanuel, our CFO, after which we will have time to take your questions.
And with that, I would like to hand over to Nicolas.
Thank you, Daniel, and good morning, everyone, and welcome to our Q2 trading update. We hope you're safe and healthy. So the 2020 started off a bit rough, as you know, but ended above all of our expectations. It was a challenging environment, but the full global team did a heroic job. And I would like to thank you all for your dedication to our customers, restaurants, and wider community.
So thank you, everyone. Before going into the business and financial update, let me reiterate our vision on slide two. This is really driving what we're striving for each day. So we aim to always deliver an amazing experience. This has been and will continue to be the core driver for our activities.
We are innovating and developing the business further with the customers' needs in mind. This has also been the main driver for us when we started with logistics six years ago, same being the case when we look into kitchen concept, POS, payments, supply system, multi vertical, DMARDs, and many other things. We will keep pushing for improved delivery time, choice, cost, and service until we deliver an amazing experience. We will do this while still making good economics. We will go a little bit more into details on that later.
But first, let me reiterate and revisit our overall target on Slide four, please. As many of you will remember, when we IPO ed our business in 2017, we promised 40% growth in the short and the midterm. Looking back on our development since then, I think it's safe to say we delivered on that promise. Seeing where we stand today and the potential ahead of us, we are very confident that we will also deliver on our second growth target we set at IPO, which was to show a long term growth of 30%. We are just today delivering another proof point for the strong growth potential we're seeing by increasing our revenue guidance for this year, and Emmanuel talk a little bit more about this in a moment.
Secondly, we go for leadership position in the markets we operate in. To achieve this, our third target is to build tech and product leadership for a third generation on demand platform. And finally, you know we are believers in driving profitability through scale and automation. We continue to target a long term EBITDA margin of five to 8% of gross merchandise value. The tremendous growth we are achieving shows that there is great potential for a company with our capabilities out there.
And as long as we continue to find attractive growth opportunities, we'll keep investing to strengthen our position in the countries we operate in. We do so, however, with the promise in mind to deliver also on the long term profitability target. Slide five gives you an update where we stand regarding not only our global footprint but also the strength of our position. We considering ourselves to be rational allocators of capital, and if we are active in markets, we do so in order to take a leadership position there. Today, in more than nine out of 10 countries, we are the number one player.
And also, weight need by GMV, around 80% of the GMV is steaming from those number one markets. This does not yet take Voova Brothers into account. At IPO, I showed a similar graph with seven markets highlighted as distance number two in a comparative market with clear action to resolve. Happy to announce that we have now resolved all these seven markets. In markets we are not yet leaders, we see a clear path to get there and we'll keep pushing until we are.
In some markets, it will take months and in other places, many years, but eventually, we will be there. Overall, more rational behavior is kicking in to many of the markets we operate. If you see this trend persist, then also Delivery Hero will reduce its aggressive push slightly. We continue to be rational consolidators, and it is partially for that reason that we feel well equipped with the proceeds from the convertible bond issuance earlier this month. However, with the strength of our business, we would rather push the clear leadership organically and buying competitors out.
We also selectively start organically in a handful of markets with clear fit to our geographic footprint. This was the case for the successful launch of Laos, Myanmar and Cambodia earlier this year and Japan in Q3. We have said earlier in the beginning of the year that we reserve the flexibility of additional investments of up to €200,000,000 for opportunities that we see. As competition has been a bit lighter than expected, we are reducing that now to €150,000,000 including circa 20 to €30,000,000 towards launch in the Japanese market. Finally, and of course, quite importantly, I want to give an update on situation in Korea and the pending approval for our partnership with Pruva Brothers.
Our confidence in getting the approval in the 2020 is unchanged. The partnership will will reinforce our position in Asia, and we are committed to invest in the Korean ecosystem and make it a tech hub for global services. Delivery will also support Voova's expansion in new verticals and new markets, we will share global best practices, innovate together, and create benefits for all stakeholders with more choice, better service, and more advanced technology. Emmanuel will comment on the financials in more details later on, but let me mention some highlights on Slide six. Some of those numbers you will already know from the flash update we put out at the very beginning of the month as there was a huge interest on the market on how our business did in the second quarter dominated by COVID.
As you have seen from the numbers delivered very well, in Q2, we delivered two eighty one million orders, resulting in order growth of 95% year on year. This was despite an initial strong negative impact from COVID. We saw many good investment opportunities during the quarter. We have been doubling down on those, leading to sequential improvement in growth from month to month in both absolute terms and year on year growth. This improvement continued
And continuing at this pace, 2020 is set to be the first year in which we will total more than 1,000,000,000 orders on our platform. Gross merchandise value in Q2 was up 66% on a constant currency basis to €2,800,000,000 and together with VUBA, about €5,000,000,000 GMV in Q2. Revenues continued to grow rapidly by 96% for the second quarter on a constant currency basis to €612,000,000 Now moving on to our business update and starting with a recap on how we have engaged with our most important stakeholders during COVID nineteen. What the combination of these measures hopefully shows is that we consider ourselves to be part of an ecosystem and that we acknowledge our responsibility to be a trusted partner, especially in more difficult times. We're confident that these investments have helped the ecosystem and would pay back over time.
Slide seven shows some of the examples of how we managed to support local governments and communities. Here, it was not only about donating or delivering a huge number of meals and food to those who needed it, but also by working together with governments more generally. Our customers also benefited from many of our app features to ensure their safety and well-being. On Slide eight shows how we also carry a lot for our riders to base our brand ambassador. In addition to many other initiatives, we have set up a €3,000,000 rider financial support program to help those riders who got infected, and for that reason, could not work.
We just decided to prolong that program to at least October. The largest investments went into helping restaurants. In most markets, we've waived onboarding fees to allow restaurants to net off losses of them losing dining customers. Since restaurants have been operating below capacity, the, by far, largest contribution we can make to help is not reducing fees, but investing more in initiatives that can drive revenues and put the restaurant at higher capacity utilization. We have used a significant amount of the commission we collect to reinvest in free delivery and promotions.
We have also been pushing pickup and other services to drive more revenue to our restaurants. The crisis is, of course, not over, but so far, results have been above expectations. On the next slide, you find a selection of what we have introduced or extended operationally. We have done many things to increase Choice significantly, resulting in more than 630,000 restaurants present on our platform at the June. We made made further advancements in order experience, personalization, just being one of them, while also further improving the speed of our delivery, which obviously good for customer experience, but also for our economics, resulting in value utilization of our driver fleet.
In regards to QuickCommerce, I have already given an explanation during our last call, but listening to the numerous questions we received on this, I opted to come back on this topic again today. Slide 11 summarized the main characteristics of type of commerce on the left hand side. In short, quick commerce stretches to everything you want to have delivered more or less immediately to your doorstep. This can be anything from convenience items to groceries to items from local stores. On the right hand side, you find the GMV that we're doing today in that business and the market potential potential we see from today's standpoint.
This clearly shows that this is already today a very real business, but at the same time, there is still a long runway ahead of us. It might have been a bit confusing as we've been speaking about QuickCommerce and instantly afterwards about our offering, which is the DMOPS. So slide 12 illustrates illustrates a bit better that there are two pillars of QuickCommerce. We are actually active in both of them. In third party vendors, we act as an agent.
We deliver the items from local vendors and get a commission on that. Orders, GMV and revenues are captured in the platform business. We are present in 37 markets with a multi vertical offering in more than 20,000 vendors across groceries, pharmacy, flowers, electronics, and more. On the other hand, with our own DMARDs, it becomes a principle. Revenues from goods sold are reported in integrated verticals together with our still smaller kitchen business.
At the June, we were present with around 150 DMARs across 11 countries. Our ambition or our very ambitious target is to operate 400 DMARDs by the end of this year. We provide a customer focused assortment of up to 3,000 products. These are mainly top up grocery products and convenience items that cater to the more short term needs and impulse purchases ordered both during the day and at night. And very importantly, those products we aim to deliver less than fifteen minutes from placement of the order until delivery.
Both pillars combined show an order growth of 98% quarter on quarter to 10,500,000 orders in Q2. So much for the concept of DMARDs. Slide 13 shows an overview of the ordering process, and you also get an idea of how a DMARC looks like from the inside. If you want more details, there is a link to a video at the bottom of this slide. Even when looking at this simplified process overview, you can certainly imagine many of the technology components that need to be in place for us to operate this efficiently.
Things such as data science or or machine learning for routing optimization, dispatcher technology, item selection, warehouse management, and so on. The business also relies on large volume and a large delivery fee. There have been a lot of questions in regards how the economics work for this business model. And on the next slide, we show how it works on a high level. We only show an illustrative view on unit economics on a long term steady state comparison to own delivery food business.
To be clear, we are not yet there on our own delivery food delivery business and also not for Mart. For D Mart, we are currently contribution margin negative overall as we are launching new stores very quickly. We have highlighted before that we aim to reach breakeven on a store basis after nine to twelve months. Some of the revenue drivers will also rely on global scale, increased purchasing power, high volume in various areas. DMARC is a business I would never do if we didn't already have a huge scale from our food business or the logistics capabilities in place.
One of the most important metrics for our demark is the front margin we make on the goods sold. And hence, very importantly, and different to the initial expectation that many investors have, we can expect to achieve a margin of slightly below 30%. There are cases of much lower margin, but also many with higher much higher margin. As reflected in the remaining marked P and L, the very lean setup benefits from the fact that customers do not come in store, allowing store layout to be more efficient with faster picking, better item selection, warehouse management, and more opportunity for dynamic pricing. Some Vimar stores are already profitable today without having pulled most of the additional levers that are shown on the right right hand side.
Finally, from a cash flow point of view, given we are able to negotiate for favorable payment terms, which are longer than the turnover time for the product in store, we are also getting to a negative working capital for this part of our operations. And on that note, over to you, Emmanuel.
Well, thank you, Nicolas. Good morning, everyone, also from my side, and welcome to the second training update of 2020. It's a it's a special update for us in many ways. While the first quarter twenty twenty was only partly hit by COVID nineteen and the resulting restriction, the second quarter already started in that situation and then rather saw an easing of lockdown and curfews in many countries, but not all. There was an understandable amount of interest from the capital market in how we did in this environment.
And wanted to to provide an even more timely and transparent view, we therefore provide this flash update early July that you all have probably in. We took it also as another positive sign of confidence on the market as we're as we have also been able to place the two tranches of convertible bonds in the July on attractive terms, raising €1,500,000,000 of capital. We always have been in favor of firm acting from the position of strength, and with that placement of financial position has become even more healthy and providers with the necessary flexibility to react, should opportunities with an attractive return present themselves. I will comment on our cash position in a moment. But before that, let's start with our group financials.
First, as a reminder, please note that the strategic partnership with VUBA is not reflected in any of the figures until closing of the transaction. And as Nicolas just said, we expect regulatory approval from the KFTC in h two twenty twenty. In q two twenty twenty, we saw a vast majority of governments globally easing the restrictions, which were imposed to contain the spread of the COVID nineteen pandemic. And as previously expected, business actively immediately pick up, and this is especially the case in MENA. And as a result, we are pleased to see that order growth kept increasing, reaching a 95% year on year growth in q two twenty twenty after 92% year on year growth in q one.
And this particularly shows the resilience of the business and that the strategic investments made in the past years have now really paying off. The home delivery orders increased to 62% of the total orders in q two, driven by increased customer demand and also our steady expansion across market. The GMV reached almost €2,800,000,000 in q two, which translates into a 66% increase on constant currency basis. Basis. It grew by 58% year on year in q one.
The revenue are growing even a bit stronger than the prior quarter. It decreased by 96% year on year on a constant currency basis to reach €612,000,000 in q two after having grown by 92% year on year in q one. And end of the quarter was significantly better than the beginning. So again, similar to previous quarter, our revenue on the on the group level have been impacted by the application of CER DS 29, the so called accounting for Argentinian operation. The primary h one adjusted EBITDA margin stands at minus 28.4% of revenues and minus 6.2% of GMV.
All segments showed improvement in terms of adjusted EBITDA margin development year on year, and Asia and Americas segment showed increased losses in absolute terms due to investments made in this region. MENA, despite the COVID nineteen impact, improved its adjusted EBITDA, while Europe was slightly negative after group costs but profitable before. You will find more details in our full H1 twenty twenty IFRS report on August 27. And in the light of the year, ongoing COVID situation, we have updated the detailed overview on the order development on the next slide. As you remember in our last training update, and this is exactly three months ago, at the April, on April 20, we've shown an order decline of eleven percent for the group compared to March 11 when COVID was declared as a pandemic a global pandemic.
And if you compare this today, you see a market recovery with order numbers of the group now already up plus 24% compared to that day in March. On the segment level, the impact on Asia was very limited, while Americas had very fast recovery and been trending above its normal level. Both segments also benefit from the fast rollout of our new verticals. MENA, the segment that was hit hardest from the from the restriction, took longer to recover. Some markets are trading above previous level, while others, and in particular Kuwait, are still not fully out of curve years.
Finally, Europe is up 12% now. Order growth slowed a bit in the last weeks with the first vacation period kicking in, while year on year growth is still on the same elevated levels. Like for America, we expect this to fall back to more normal levels over time. So now let's move to your to move on to discuss the performance of each segment shortly, and I would start with our bigger segment Asia on slide 18. So Asia has continued to be a focus area of growth for us in in in q two twenty twenty.
As mentioned in previous training updates, we clearly see the impact of previous investments to to improve our city coverage to customer experience through a faster and more reliable delivery as well as a a greater response selection. And as a consequence, we see the quarter record acceleration to 290% in q two twenty twenty to 157 orders generated on the platforms. And we are still early stage in Asia. But as we are starting to reach significant size, we should expect the year on year growth numbers to to decline from this exceptional level. Asia GMV has increased substantially to by a 166% on constant currency to €1,300,000,000.
And our revenues reached €280,000,000 for q two, growing by 234% compared to q two twenty nineteen on a constant currency basis. The stronger revenue growth compared to GMV was mainly due to the increase of our own delivery orders and now reaching 76 of total orders for the segment. We are further accelerating the rollout of the on delivery by focusing on customer experience and decreasing delivery times. Now let's move to the to the next segment in MINA. In q two, 67,000,000 orders were generated, representing a negative growth of 6% year on year for the reasons already discussed previously.
And as a reminder, some countries have applied strong coffers, that have not been yet fulfilled in some cases yet. Kuwait, an important country for delivery, entered in the second phase of their reopening plan only by June 30 with limited opening hours in phase three today, not enabling us to deliver until 9PM. Since mid March until the '2, the MENA segment was impacted by the COVID related restrictions, and circa 40,000,000 orders were not generated to do the cross use, in particular in Kuwait, Saudi Arabia, and Turkey. And the resultant total loss of €45,000,000 to €55,000,000 in gross profit was compensated with cost saving measures, such as marketing reduction, resulting in only 30,000,000 to €35,000,000 impact on our EBITDA until June 30, which is still well within the guidance that we gave of up to 50,000,000 impact that we gave in our in our last earnings update in April. The GMV grew by 2% year on year in Q2 twenty twenty to EUR $822,000,000 on constant currency basis, and this is reflected in the year on year revenue growth of 1% on a constant currency to €166,000,000 On delivery business, keeps in spending and reached now, which is 42% of total orders after 35% in Q1.
The next slide is showing the development of our European operation. Our Europe segment reported stronger growth since IPO. It generated 31,000,000 orders in Q2, a growth of 47% year on year despite a deeper decline and slower recovery in Southern Europe. On delivery orders are now at their 26% of total orders. Europe GMV grew by 73% to €420,000,000 while revenue grew by 90% year on year on constant currency basis to €76,000,000.
And now finally, Americas on slide '21. Americas generated 27,000,000 orders in q two, which represents a year on year growth of 11 a 111% compared to the same period of 2019, and this being the sixth consecutive quarter with accelerated growth orders. GMV grew by 85% to €249,000,000, and revenue were up by 132% on constant currency basis and amounts to €57,000,000 On delivery orders are now at 71% of total orders after '62 in the last quarter, q one twenty twenty. As mentioned before, the revenues as well as GMV for Americas have been impacted by the application of the DI SR 29, the interinflation accounting for Argentinian operation, and this came into action, if you remember, since September 2018. And the impact of considering Argentina as an imperinflation country was a negative of EUR 2,400,000.0 in Q2 twenty twenty regarding revenues and a negative EUR 10,700,000.0 in terms of GMV.
Finally, let's move to the integrated verticals segment on slide 22. As a reminder, the segment captures the activities where we are operating as a principal, Michel has mentioned this and where we are in full ownership of DMARC and the kitchens we operate. And please note that integrated vertical orders in GMV are not public transit, but represented in the regional platform business business values. And therefore, these values are only a visual representation. The rapid expansion of our DMARC business contributes to a significant GMV growth of 109% over q one
Now let's move to and let's have a look at the development of our cash position on the next slide, Slide 23, please. So to give you a better overview, we are showing the cash position and the moving parts since the end of last year 2019. We end the year 2019 with a net cash and liquidity assets position of €100,000,000. And in h one this year, we had a positive effect of the in the amount of €2,300,000,000 from the equity raise and the convertible bonds offering in in in January. So taking into account the negative cash and liquid asset change of circa €500,000,000 in the first six months of the year, we stood at €2,600,000,000 at the June.
In July, as you know, we are we have placed another convertible bond with two tranches in total amount of EUR 1,500,000,000.0, which brings our net cash and liquid assets position to EUR 4,100,000,000.0, of which EUR €1,700,000,000 are earmarked for for the cash component of the VUBA transaction. That position, as described before, is putting us in a in a in a strong position to make sure of attractive opportunity of use if if attractive opportunities should raise. Now let's move to to the next slide and our guidance. On the back of our of our resilient and strong operative business performance for the first six months of this year, we are increasing our outlook for the full year 2020 revenues for the range of between EUR2.4 billion to EUR2.6 billion to the new range of €2.6 to €2,800,000,000 The outlook for the adjusted EBITDA remains unchanged. Here, we continue to expect an adjusted EBITDA margin of between minus 14% to minus 18% as a percentage of revenue.
We have stated that that this guidance is excluding additional investments of up to $102,100,000,000 euros that we intend to to utilize to extend our leadership in in in selected markets where where required. And so far, we have spent significantly less than half compared to our initial guidance. And consequently, we are changing these numbers downwards, and we are now reserving the flexibility to spend up to €150,000,000, including a 20 to €30,000,000 for the announced launch in Japan. The COVID-nineteen related costs will be absorbed in our group guidance, including the negative impact up to €15,000,000 on adjusted EBITDA expected for for the MENA platform business, as I mentioned before, due to the COVID nineteen court years. So while we are on on group level, we continue to invest.
For us, direction is clear. The EBITDA margin from here is improving and as we grow in scale and can lever on improving contribution margin. And furthermore, we have proven to deliver a path to profitability for two of our platform segments, Europe and MENA. Europe is expected to reach breakeven in 2020, while the adjusted EBITDA of the MENA segment is expected to be higher in 2020 compared to 2019. So that was it from our side, and now we are looking forward to your questions.
Thank you.
Ladies and gentlemen, we will now begin our question and answer And the first question is from Silvia Comeaux, Deutsche Bank. Your line is now open. Please go ahead, ma'am.
Thank you, and good morning, everybody. I have a couple of questions. The first one about Japan. So the launch of the new operations, I would say, is a surprise. I mean, you had mentioned the plan to expand in Asia in partnership with Wuha Brothers, but the team is yet to join.
So can you please share your thoughts about the market opportunity there, the current competitive landscape, and why you have decided to invest now? And then second, the set of on delivery continued to grow rapidly, now at 62% of orders at the group level, of which 37% delivered in less than twenty minutes. Can you please talk about how we should expect these metrics to evolve in the medium term by segment? And how the current group scale and average delivery time compared to what is needed to deliver the steady state unique economics that you shared in slide 14? Thank you.
Hello?
Sorry. Being on mute. Hi there, Sylvia. So starting off with the Japan launch, it it it's something that we don't exclude to do with Vuba, but we also don't wanna wait. I know we we're still waiting for the approval from KFC, and we see that the Japan market is a big market, but we also see that Uber Eats is pushing very, very hard in that market, and we don't wanna fall behind too much.
It it would it would be too hard to catch up then. So, therefore, we decided that we launch Japan, and we we we also are supported to Google Brothers launching a plan, and, potentially, we can find then a good way of of combining efforts in a later phase. Then I think to compare the market you asked a little bit there, and and Uber Eats is possibly a leader, but they're also DemiCon and Rakuten. But I think Uber Eats is the one who's clearly taking market share there and possibly all the largest. In terms of OD, so it has continued to grow while we have improved economics, making it faster, making it more affordable.
The the fact that we are faster is an indication indication of efficiency and and and and the ability to deliver fast. But actually delivering faster is actually worsening our UTR. So if you wanna optimize optimize for high UTR, we would actually be a bit slower. We would then also potentially patch orders. So so delivery time and during the economics were it's not related.
We think that we'll be able to decline both of them, and that's the focus we're having this year. And they will decline in all regions both well, increase the UTR or the number of jobs per hour, but also decrease the delivery time. Exactly how much, I I don't wanna give out here, but it it will be a further decline in in in delivery times.
Okay. Thank you. Maybe just just a follow-up to clarify the question on the unit economics. Just wondering if you could share some thoughts about how you are comparing right now at the group level, at least for on delivery platform business when we when we look at the steady state unit economics? Thanks.
So Alright. Maybe, Manuel. Yeah. Please.
Yeah. I mean, like, you know, we we show improvement in on delivery unique economics also in the last quarter. This is true for three segments, I mean, like your, Asia, LatAm, and Europe. I mentioned in my presentation, you know, the impact on the gross profit for MENA. So MENA, was affected quite, you know, logically, after what we sold, you know, the 40,000,000 orders having an impact of 45 to 55 on gross profit.
So that's the only segment where we took a hit due to COVID, clearly, while the other segments are improving their own profit or the audio unique economics quarter after quarter and year after year, obviously. So on that, we're completely on track.
Should that mean it's a big part of of the unit economics. Therefore, on a group level, it did decline in q two, but that is not because the three segments actually improved. It was only MENA to decline slightly, but it has an overall larger impact than the positive effect of that market. We hope that we help
next question is from Mamit Pola, Citi. Your line is now open. Please go ahead.
Hello. Morning, everyone. Good morning. Couple of questions for me, if I can. I was interested in this dynamic delivery pricing that you've now rolled out to 26 markets.
Maybe you could talk a bit about what the impact has been and, you know, your plans for further rollout into other markets there? And then the second question was on your cash burn. So when I look at the slides from the one q and the two q on your cash position, it seems that the cash burn reduced from about 300,000,000 in the first quarter to 200,000,000 in the second quarter. And, obviously, that's despite the increase in owned delivery, the demark rollout that you had in two q, the loss of EMEA. So just wanted to understand a bit better what had driven the reduction in the cash burn quarter on quarter.
Cool. I'll cover the first, and then Emmanuel will cover the second. So we have seen a very good effect on the initiatives we've done on dynamic pricing. It's not only one thing they were doing. They're doing a lot of thing at the same time, also area scoping and and so on.
So the team has done a fantastic job. This is a large team, and this has now been rolled out in significant number of markets, and we will roll it out in all markets. Most markets before end of the year. So that that is happening. Emmanuel on the second.
Yeah. Thank you, Monique, for the question. So maybe to help to do to to explain it, maybe I should give you more details on on the bridge. So for the 500,000,000 that you see on this on this slide, the vast majority, circa 300,000,000, is linked to the negative epitaph that we are producing for the first six months. And there are other other positions.
So there are 44,000,000 linked to a normalization, which, you know, basically, this is usually due to our transactions that we're doing. There are 86,000,000 linked to our equity investments. And in here, this is we increased our stake in global. That's the the main part of it, by far. And there is another, 79,000,000 on CapEx, of which 58 is linked to our rent and our premises and and so on and so forth.
And due to this normalization and also equity, then it depends when you you you, having this this kind of spending or cash out. And that's the reason why you have this movement between two to two quarter. It's not linked, automatically to our EBITDA, which is large, you know, proportion of this 500. But as I mentioned, there are also dispositions of equity investments and CapEx, and this is basically when our normalization and it will depend of the time where you take decision or the cash is going out for for this position. So that's the reason why you have these differences between two quarters.
Understood. Understood. Thank you. Can let me just ask a follow-up from, the first set of questions. When you said that if you reduce the delivery time, so you you deliver faster, that worsens the UTR.
Can can you explain that?
Yeah. Sure. So I'll give you a simple example. If the the delivery time is, of course, from the time you place the order until you receive the food, that doesn't mean that a delivery rider is engaged the the full time here. The delivery guy is only rider is only engaged from the time we tell him to go to the restaurant and and go to to to to to the customer.
So that means by waiting there, we can build up more volume, and we can even pick someone who's more and better located for taking that order. And we might also wait a little bit longer to to give this rider let this rider go to the restaurant, making sure that the restaurant is done with the cooking because a big inefficiency for many of the delivery platforms is that they have to wait for the food while it's being cooked. So, therefore, if you wanna optimize your UTR, you wait you wait longer than necessary to making sure that food is cooked, and you wait to allocate a rider until you have someone who is next door to that restaurant. But, of course, that makes a very long delivery time, and we optimize for the reduced delivery time. That means we have to work even harder on operations and restaurant compliance and and and take a little bit of sacrifice there.
So that hopefully will explain.
Next question is from Markus Stiebel, JPMorgan.
Itras, I have one question on these additional investments where you basically guided now for a lower number of €150,000,000 Could you elaborate a little bit more why you concluded this is now the right number? Why you kind of like don't see the previous returns anymore for new investments and you become a bit more, yes, let's call it conservative here, which is clearly very helpful. So just a few comments on that would be helpful. Then the second question is also on Japan and the wider implications. I mean, clearly, in Japan, as you said, Uber Eats seems to be very strong.
You decided to go. Is that also maybe a playbook now for other markets in Asia where you're not present? Obviously, Indonesia is a big market, but also it seems very well owned. Would that be something that you also would consider to basically tackle other players more in Asia than you've done in the past? And then again, what would that mean for investments?
It'd be quite helpful if you can help us squaring that. Thank you
very much. Yes. So it is, of course, a positive and a negative news that we are not investing the full 200,000,000. We always wanna invest as much as we can at at at at good return. And we we felt that we had a good plan in place and we gave some additional room.
We we don't think that we're able to invest the full amount at the return that we want to. So as, of course, negative, the positive is that, yeah, we will we will make a little bit less negative EBITDA. But but overall, I it's negative. But so so part of this 150,000,000 investment or 200,000,000 initially up to was also to respond to comparative pressure that we can see in some markets. I think that comparative pressure has been a little bit less than expected, and that's why we also feel comfortable that that up to a 150,000,000 will be enough to keep on growing our market shares.
When it comes to Japan, yes, Ubryd has a strong position there, and they're building very fast, and it's it's it's a good company. But we we have confidence from being competing to many players in many markets over the last year, and I think we have evolved a lot. And I think we have been gaining market shares in all markets, and we're we're confident that we can compete with anyone. We still like to avoid markets which are very late stage and very mature. I think in the case of Japan, we we are behind with a couple of years, but I think that we can catch up on.
If you speak about markets like Indonesia, then you have two competitors fighting fiercely, and they are at a much later stage. So this then also speaks for not an an end market where we would necessarily wanna go out into. I think there's also that many comparative I don't know. Five comparative environments that we wanna be in at the same time. And right now, we we it's a little bit less, so we feel like we can't take on a multi layer panel.
But, also, keep in mind with Buber Brothers, we also get into Vietnam. So I think with that, we feel pretty we we think they'll have enough on the plate, and we will focus on those before going into any more large competitive markets for the time
line waiting to ask their question. And the next question is from Sarah Simon, Berenberg. Your line is now open. Please go ahead.
Yep. Morning. Thanks. So a couple from me. You'd mentioned in an interview, that you're talking to everybody and that you might consolidate Rappi and Glovo, and, obviously, you just told us you've invested, a bit more in Glovo.
Can you can you comment on what might be going on there in terms of any conversations you're having or how how likely such a thing could be? And the second one was on dark kitchens. You haven't really said much about that recently, and you've talked more about DMart. Should we assume that DMart's kind of on the front front burner and dark kitchens are on the back, or are you sort of busy doing those as well? Thanks.
Thanks. We'll try to answer fast given the number of questions. So and we keep a constant dialogue. And we speak with with Rafi and Global on a a weekly basis, and we have a good dialogue. Of course, we're open to any opportunities at this point in time.
I don't think there's an opportunity. We we we so so therefore, I would not expect that we are going to going to acquire or make an offer on any of this company in in at this point in time. When it comes to Cloud Kitchens, it's it's still a very tough area, and we told you from the start that we were cautiously trying things out, and we don't wanna scale something until we really feel comfortable with it. I think we we, of the last quarter, done some very good progress here, But I I think this is not necessarily on the back burner, but but we feel pretty good about things that we have come up with and results that we start seeing. But the the cost and the investments required for this is gonna be less.
It's also different in in a cloud kitchen if you are the agent or or not, and it could be that this will not even be be this could be a lighter approach to it, which will not show up in integrated verticals, but rather help restaurants and more as a service and as an as an engine. But it yeah. That's it.
Thanks.
And
the next question is from Farrell Macho, Exane BNP Paribas.
Two quick questions for me, please. First of all, in Asia, I think you mentioned that we should expect lower growth going forward. Is that correct? And if we can maybe come back on why is that the case and give us any additional color on the trends in H2 in segments, in the continent? Second question, just quickly on QuickCommerce as well.
I think that GMV seems to be mainly driven by third party vendors for now. So how do you want the split between third party vendors and demarch to evolve in the future? How should we think about it? And lastly, on the the same thing, you talked about other revenues in your P and L. Can you just maybe give us some detail on what that is in the in that segment?
Thank you.
Perfect. So Asia low growth so so Asia has keep on growing fantastically when you look at absolute numbers. But if you saw last q three q three last year, we start hitting fantastic growth, and it was in Taiwan and many places. And, of course, some of these markets grew with 3000% in in q three. Keeping at 3000% is is simply impossible
So, therefore, some other markets have been scaling faster and so on. But, overall, we're we're comparing ourselves to much harder comps. So, therefore, you can expect that sequential growth would be there. But on a year on year basis, you should expect that it will decline. It can simply not stay on 290% order growth for for forever.
Having said that, I still think there'll be very high growth, and and the traction is is still there. So I feel very positive about it. When it comes to quick commerce, it's much easier to scale third party. And here, we can quickly get to twenty thousand third party vendors onto our platform in 37 markets. DMARS takes much longer because you need real estate, you need inventory, warehouse management, and so on.
And we have now a 150 DMARS globally. So it's 150 versus 20,000. We we we scale, of course, the DMARDs because it's a different value proposition, and we believe believe a lot in that, but it takes a little bit longer to scale. But we we should expect that it will it will third party could still be the largest for for a very long time. When it comes to other revenue, so if you look at DMart, and I assume you refer to that, the the I know you have extra if you look at the grocery stores to have certain location in the store and and and and suppliers have to pay for being in those locations.
Similar you can do within within that. You have certain locations, the premium placement of certain product. There will also be sampling that a lot of companies want customers to try certain products, we can easily add sampling products to those items. So so those are two two specific examples from other revenue that we can drive in this business. Hope that helps.
Thank you.
Thank you.
And the next question is from Joe Barnett Lamb, Credit Suisse. Your line is now open. Please go ahead, sir.
Excellent. Thank you, Nicholas. Thank you, Emmanuel, for taking the questions. Firstly, you briefly stated affordability has bottomed. I think it was in 2Q last year from memory.
Can you give a bit more detail on gross margin and the evolution of affordability and its impact on AOVs? And then secondly, given you're not investing the full €200,000,000, does that tell us anything about spending intentions into next year? And I'm particularly thinking the early stages of QuickCommerce, I imagine you could perhaps expand faster there, but maybe there's just a cap on how much you can do at any given time. Maybe most of your questions. Thank you.
Perfect. So, yeah, there's less and it was a little bit extra affordability now using COVID in particular new restaurant. We we we got so many new restaurants and and and merchants on our platform, and you want to give them orders quickly. They also needed orders quickly because of the pandemic. So, therefore, we did some extra promotions.
We did some extra free delivery compared to what we normally would do. In general and that that has a slight effect on AOV. But overall, the AOV is not dropping. It's it's more fixed now than what we saw in the past. The the difference is that we're growing in markets with slightly lower AOV, so we go faster than markets like Thailand, Malaysia, Philippines, and so on with with lower basket today, but our average is then declining.
But the profit contribution from from these type of markets is not worse than anywhere else. So on a percentage basis, the profit contribution, they are very similar. If it's a €7 basket or a €30 basket, it's it's a similar outcome in the end on a percentage basis. The spending for next year, I'll I'll be a little bit careful here because we'll have to see and have to build a plan. Certain things are hard to scale cost wise.
So you mentioned the DMart as an example. It's it's used a lot of effort and time and people involved to scale those things. The other advantage is that we don't have to buy traffic. I'll then look at the food delivery business. Invested hundreds of millions in buying traffic.
Now we get hundreds of millions of free traffic, which means that the raw losses to to these other verticals that we're building is significantly less going forward. But and we will we will keep investing and building leadership, but and I hope we find more investment opportunities, but we we we start coming to a point where we cannot we cannot increase those investments opportunities exponentially, but rather marginally, if any.
Thanks very much, Nicolas. Appreciate it.
Thanks. And the next question is from Your line is now open. Please go ahead, sir.
Great. Thanks and good morning, everyone. So my first question is within the kind of roughly minus $320,000,000 of EBITDA in the first half, could you just quantify how much of that is from discretionary extra spend and how much of it is underlying? And then if I look into the second half guidance in terms of underlying EBITDA, I think it assumes a big step up from kind of mid to high 20s negative margin in the first half to, I don't know, maybe minus 10% in the second half depending on what we're assuming for how much discretionary spend was in the first half. So it's a big move up in the guidance in the second half.
Could you just help us outline what's going to drive that and why you feel so confident it can be achieved? Thank you.
Perfect. I can do the first and you cover the second, I know. So it's it's hard to say where it's discretionary spend or not. And then compared to and we have a budget and and of course, have some extra discretionary spending if we saw the opportunities in the competitive environment and so on. But, of course, also the budget and our plans have a lot of discretionary spending.
I I I think I said in the past, you could probably take out $405,100,000,000 of marketing spending and still grow the business fairly nicely. Of course, not with 95%, but it could still be a good typical good growth for a business also with significantly low spending. We can probably also make easily a 50% more profit contribution for order in our logistic business without hurting the business too much. But, again, doing those two kind of initiatives will not make us win the markets we're operating in, and it would also be questioned in how much margins can we make in the long run as being the number two player in the market. So it's hard to say what is actually discretionary spending or is not.
In order to grow with the pace and winning market leadership the way we do, everything is but then we're required to spend that amount of the spend including the additional investments that we did. So sorry for not being able to to to give full detail there, but I think the business model is so strong with the cohorts that that we we we could easily make a profit also on a group level at any point in time, but but we choose to grow faster and and win more customers because of the high lifetime value of those customers. Emmanuel to the second.
Yeah. For this type of, Andrew, that you mentioned from the first half to the second or the second from the first, I mean, it's fair to remember that we have a seasonality in our business in q four q three and especially q four are usually very strong quarters for us, stronger than the the first one. And second, we also reflect in this in this development the the positive evolution that we've seen on our unique economics, but not only. So, you know, we we are combining the the the seasonality that we usually see in a business anyway plus, you know, the efforts and the the evolution that we have. Having said that, you know, it was also, like, you're taking into consideration COVID nineteen so that we expect that now we're going back to a more normal situation, especially in MENA that's, impact us in in h one.
So that's the that's the reason behind this step up, as you said.
Very helpful. Thank you.
Thanks.
Last question I
have last two.
Okay. So the last question is from Jurgen Koch, Kepler Cheuvreux. Your line is now open. Please go ahead.
Yes. Thank you very much. Lucky me. Thank you. Two questions.
First, on Japan again. Assuming that it looks as if in Japan, not a whole lot of restaurants have their own delivery fleet, would it be fair to assume that Japan will be almost exclusively your own delivery business? And with that, in in this respect, are you planning to enter Tokyo, very much at the beginning, or do you try to approach the main city via other areas? And secondly, on Owned Delivery overall. Now in the second quarter, I guess, about 96% of your total order growth stemmed from Owned Delivery.
Could you picture a situation where actually the maintenance sorry, the marketplace business could actually decline in terms of orders? Or is that something that we've seen in Q2 mainly reflects maybe some COVID-nineteen impact? Or so on the marketplace business, how are you seeing that trend evolving going forward? Thanks.
So on the first question, we will launch with own delivery. We think it's a superior user experience when we deliver. We do it fast. We do it more transparently. So we we we do think it is is is a better way.
Marketplace has some other advantages and can be a little bit cheaper, but because there there's someone able to somehow making making the economics differently than we do. But in the case of Japan, we will focus on on delivery and push that. I will not disclose where we enter and how we enter, but I'll let that to be a surprise for everyone, our competitors. When it comes to the OD growth, that is majority of the growth come from OD, that is partially it's it's factually correct, but it's also because we are moving some vendors into Indeed. It's also that we add more other choice for customers.
So before, they only had marketplace restaurant to choose from. Now they have a lot of other restaurant to choose from, and some of them actually move over to those restaurants where we deliver faster. So it it in overall, we have to see the business, how it's growing combined, and and then how we move between O and D and marketplace is is is separate. So it is not independent of each other. So driving O and D faster will make growth of marketplace slower
Okay. Thanks. Thank you. Well, thanks. I wish we I wish we had more time to answer your questions, but, unfortunately, we're out of time.
I know you're all busy, but I'd like to thank all shareholders for your strong support and trust. We will work day and night to remain your trust and keep your trust. We think we are in a fantastic position to build an amazing company over the decade to come, and I also like to thank all global team members at Deliver Hero. You have shown an enormous amount of dedication to serve our customers, riders, restaurants, and wider community, and particularly in these challenging times. So thank you very much.
Thank you, everyone.
Thank you. Bye for now.
And the investor relations team will be available for those questions that we couldn't take. So please feel free to reach out to us during the day. Thank you.
Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.